Partnership and Company are the most familiar terms for the people who are pursuing business education or commerce education. Besides being very familiar, many of us can’t able to correctly differentiate these two forms of business. This article presents you the top differences between Partnership Firms and Companies.
Indian Partnership Act, 1932 defines Partnership as ” Partnership is a relationship between two or more persons who have agreed to share the profits of a business carried on by all partners or any one partner acting for all”. The members of the Partnership firm are called as Partners. There are different types of partners such as Active partner, Sleeping partner, Nominal partner, Minor partner, Etc.
Partnership Frim is created by agreement between two or more people by registering the partnership firm with Registrar of Firms according to Indian Partnership Act, 1936.
Registration of a partnership firm is very simple process and Application for registration of firm must contain the following details
✔ Name of the firm
✔ Names of the partners and their addresses
✔ location where the business is carried on.
✔ Partnership tenure between the partners
✔ The main office of the firm, etc.
Indian Companies Act, 2013 defines Company as ” A Company formed and registered under this Companies Act or under any previous company law”. A company is defined easily as an association of two or more persons which is formed for doing business collectively and registered with Registrar of Companies according to Indian Companies Act, 2013.There are different types of companies like One Person Company, Private company and Public Company, etc.
To get registered with Registrar of Companies, the promoters are required to submit the copies of Articles of Association and Memorandum of Association which consists of various information relating to internal management and external management of the company.
The company exhibits certain special characteristics, such as
✔ It have a Separate Legal Entity
✔ It contains Common Seal under its name
✔ It has limited liability
✔ It acts as an artificial person, Etc.
|The members of the Partnership firm are called as Partners.||The members of the company are called as shareholders of a company.|
|Partnership Form of business is governed by "The Indian Partnership Act, 1932."||Company Form of business is governed by "The Indian Companies Act, 2013”.|
|Number of Members|
|Partnership firm must have Minimum of 2 partners and maximum of 20 partners.||A Company must have Minimum of 2 and maximum of 200 in the case of private company. Minimum 7 and maximum is unlimited number of members in case of public company|
|Partnership Firm is Created by Contract between two or more people.||Company Firm is Created by Law i.e created by incorporation of a company under company law.|
|It is regulated by the Registrar of Firms which comes under State Government.||It is regulated by the Registrar of Companies which comes under Central Government.|
|The registration of a Partnership firm is Not Mandatory.||The registration of Company with Registrar of Companies is Mandatory.|
|Partnership Deed(Agreement Document) is the mandatory document for creation of a Partnership Firm.||Memorandum of Association(MoA) and Articles of Association(AoA) are the main documents to the incorporation of the company.|
|Separate Legal Entity|
|Partnership firm is not a separate legal entity from partners. The Partners of the firm are collectively referred as a Partnership firm.||A company is a separate legal entity, It is a separate entity from its members, directors, promoters, etc.|
|Liability of Members|
|The partners have Unlimited Liability in all the matters relating to Partnership Firm.||The Shareholders and promoters have Limited liability to Capital of the company.|
|Accounts and Audit|
|Partnership Firm has to maintain accounts as per the conditions stated in partnership deed.||A Company should maintain accounts and auditing of accounts by certified Chartered Accountant are Compulsory.|
|A Common Seal is not required for Partnership Firm.||A Common Seal in the form of a stamp is required for the company for legal and functional purposes.|
|Management of the activities of a Partnership Firm is usually done by the working partners.||Management of the activities of a Company is done by Board of Directors.|
|Change of Name|
|The name of the Partnership Firm can be changed easily by having a discussion between partners.||The name of the company cannot be changed easily and a prior approval of Central Government is required to change the name.|